India targets temple gold hoard to rescue monetisation plan

MUMBAI/NEW DELHI: India is trying to persuade rich temples to deposit some of their gold hoards with banks to revive a plan to recycle tonnes of the precious metal and cut gold imports, sources said.

The scheme has only attracted about one kilogramme in a month, prompting the government to nudge temples through banks to hand over their treasures, the sources said, but at least one temple said it was still unconvinced by the plan.

India is the world’s second-biggest consumer of gold after China and the country’s insatiable appetite meant imports of the precious metal accounted for 28 percent of India’s trade deficit in the year ending March 2013.

In a bid to reduce the economically crippling imports, Prime Minister Narendra Modi launched the much-publicised scheme to tap a pool of more than 20,000 tonnes of gold lying idle in homes and temples.

“Convincing retail consumers is not an easy task, it takes time,” said a senior official with a state bank, who declined to be named. “We’re planning now to focus on institutions like temples.”

But Mumbai’s two-century-old Shree Siddhivinayak temple, which is devoted to the Hindu elephant-headed god Ganesha, said it remained unconvinced about the benefits.

India’s temples have collected billions of dollars in jewellery, bars and coins over the centuries, hidden securely in vaults, some ancient and some modern.

Modi wants temples to deposit some of this with banks, in return for interest and cash at redemption. The government would melt the gold and loan it to jewellers.

India’s economic affairs secretary Shaktikanta Das said in a Twitter post on Friday that: “No one will be coerced to monetise their gold,” adding that the scheme was entirely voluntary and certain media reports to the contrary were false.

DIRECT INTERVENTION

A finance ministry official said if banks fail to win over temples, the government could intervene directly by talking to the temples as it is looking for a big boost to the scheme to keep both imports and the current account deficit under control.

Despite offering slightly better interest rates than past schemes, the government is finding it difficult to break families’ attachment to their jewellery. Gold is used mainly as wedding gifts, religious donations and as an investment.

Another reason for a lack of interest from families and temples is that banks accept deposits only after they have been melted down, leading to a potential loss in weight due to impurities. Some devotees are also opposed to their offerings to temples being melted in the first place.

The Shree Siddhivinayak temple auctions gold jewellery donations and collects an additional 10 percent from the highest bidder, while it will miss out on that if gold is deposited with bank.

“After melting, banks will deduct impurity that will cut the net weight,” said Narendra Murari Rane, chairman of the trust for the Siddhivinayak temple.

The temple, which has 160 kg of gold and is partly plated in the precious metal, is nevertheless examining the scheme.

The Tirupati temple in Andhra Pradesh state will hold a meeting soon to consider participating, an official said.

Some rich temples, such as the Padmanabha Swamy Temple in Kerala, where a treasure estimated then to be worth over $20 billion was discovered in secret vaults in 2011, are stuck in legal disputes and cannot participate.